America's 'Big Three' passive funds now own more of Tesla than CEO Elon Musk does, report says (2024)

• America's "Big Three" passive investing funds own more of Tesla than founder Elon Musk does, per the FT.
• BlackRock, Vanguard and State Street have a combined 13.58% stake in the US electric-car maker.
• Musk has dumped billions of dollars in Tesla stock to fund his $44 billion acquisition of Twitter.

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Elon Musk now owns less stock in Tesla, the EV maker he founded, than America's "Big Three" passive-investing funds have, the Financial Times has reported.

The combined holdings of the index fund industry's three giants — BlackRock, Vanguard and State Street — make up a 13.58% stake in Tesla, it found.

Vanguard funds own 6.85% of Tesla, adding up to the second-biggest shareholder, while BlackRock and State Street funds have a 3.6% and 3.13% stake, respectively.

Meanwhile, Musk holds about 13% of the carmaker's stock, according to the Bloomberg Billionaires Index.

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The billionaire has been dumping shares in Tesla, largely to fund his $44 billion acquisition of Twitter but also to cover tax bills and service debts. He has disposed of nearly $40 billion worth of Tesla stock in less than 14 months, helping drive a steep slide in the automaker's stock price last year.

Tesla shares have shot up about 69% this year so far, as investor optimism about stocks grows. But they still trade far below their peak price above $400, hit in November 2021.

Still, that gain could be good news for the "Big Three" fund providers, given the vast majority of their holdings in Tesla are likely in passively managed funds, per the FT.

The most popular passive funds have a portfolio of shares that mirrors a stock index — typically a broad benchmark like the S&P 500. The goal is to match the market, not beat it.

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Musk, along with Ark Invest's Cathie Wood, has criticised passive management's dominance of the investing world in the past, saying it's prevented investors from enjoying massive gains in Tesla stock.

As an expert in finance and investment, I can provide valuable insights into the dynamics outlined in the article. The information presented here reveals a fascinating interplay between the founder of Tesla, Elon Musk, and the major passive investing funds in the United States, namely BlackRock, Vanguard, and State Street. Let's break down the key concepts:

1. Passive Investing:

   • The article focuses on the "Big Three" passive investing funds, namely BlackRock, Vanguard, and State Street. Passive investing involves constructing a portfolio that closely tracks or replicates a specific market index, such as the S&P 500. These funds aim to match the market's performance rather than actively selecting individual stocks.

2. Ownership Stake in Tesla:

   • The combined ownership stake of BlackRock, Vanguard, and State Street in Tesla is reported to be 13.58%. This significant ownership positions them as major shareholders in the electric-car maker.

3. Elon Musk's Stake:

   • Elon Musk, the founder of Tesla, currently holds about 13% of the company's stock. This means that the "Big Three" passive funds collectively own more Tesla shares than Musk himself, highlighting the substantial influence these funds have on the company.

4. Musk's Stock Sales:

   • Elon Musk has been selling substantial amounts of Tesla stock, amounting to nearly $40 billion in less than 14 months. The primary reasons cited for these sales include funding his $44 billion acquisition of Twitter, covering tax bills, and servicing debts.

5. Stock Performance and Investor Sentiment:

   • Despite Musk's stock sales, Tesla shares have experienced a 69% increase in value so far in the current year. This performance is attributed to growing investor optimism about stocks in general.

6. Passive Fund Influence on Tesla's Performance:

   • The article suggests that the rise in Tesla's share price could benefit the "Big Three" fund providers, given that the majority of their holdings in Tesla are likely in passively managed funds. This underscores the impact of passive fund flows on the performance of individual stocks.

7. Criticisms of Passive Management:

   • Elon Musk, along with Cathie Wood of Ark Invest, has criticized the dominance of passive management in the investing world. They argue that it has prevented investors from enjoying massive gains in Tesla stock, emphasizing the limitations of passive strategies in capturing high-growth opportunities.

In summary, this article delves into the intricate relationship between Tesla's founder, Elon Musk, and the major passive investing funds, shedding light on ownership stakes, stock performance, and the ongoing debate about the influence of passive management in the investing landscape.